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CFM 263 94 http://www.bull-trend.com http://www.bull-trend.com/bk2/img/flogo.jpg Draghi Speech: Economic upswing is becoming solid http://www.bull-trend.com/ Currencies http://www.bull-trend.com/ Mon, 29 May 2017 13:19:09 -0400 Key quotes from the introductory statement by the President at the Quarterly Hearing before the Committee on Economic and Monetary Affairs (ECON) of the European Parliament in Brussels: Downside risk to economic outlook is further diminishing Despite firming recovery, domestic wage pressures are insufficient to support the HICP towards our medieum-term objective In June meeting will receive an update on growth and inflation outlook An extraordinary amount of mon. pol. support is still neccessary AUD/USD confined in a narrow range around 0.7435 level http://www.bull-trend.com/ Currencies http://www.bull-trend.com/ Mon, 29 May 2017 13:12:23 -0400 The AUD/USD pair maintained its offered tone for the third consecutive session on Monday, albeit has managed to hold few pips above session lows touched during Asian session. The pair on Monday gapped lower amid risk-off environment and extended last week's reversal move from three-week tops. A mildly cautious environment, in wake of N. Korea's latest ballistic missile test, coupled with subdued action surrounding copper prices was seen weighing on riskier/commodity-linked currencies, including the Australian Dollar.  Despite of the offered tone, the pair has held above one week lows touched last Friday. Against the backdrop of uncertainty about future Fed rate-hike moves through 2017, investors this will take cues from one of the most important US economic indicators - NFP, in order to determine the pair's next leg of directional move.  Meanwhile, political uncertainty from the US continues to fuel concerns over the US President Donald Trump's ability to push through pro-growth economic policies. Hence, sliding US treasury bond yields seems to be lending some support to higher-yielding currencies - like the Aussie, and contributing towards limiting further losses for the time being. With the US markets closed in observance of Memorial Day, the pair is likely to extend the ongoing subdued price-action ahead of Australian building approvals data, due during early Asian session on Tuesday.    •  AUD to remain broadly range bound, anchored in the mid-0.70s - TDS Technical levels to watch Bears would be eyeing for a decisive break through 0.7425-20 immediate support, which if broken is likely to accelerate the slide towards the 0.7400 handle en-route 0.7385 horizontal support.  On the flip side, sustained momentum above 0.7450-55 area (session tops) could lift the pair back towards 0.7475 horizontal resistance, above which the pair is likely to move back above the key 0.75 psychological mark and head towards testing its next major hurdle near 0.7515 region. US Budget: President's high-wire act - BMO CM http://www.bull-trend.com/ Currencies http://www.bull-trend.com/ Mon, 29 May 2017 13:07:17 -0400 Sal Guatieri, Senior Economist at BMO Capital Markets, notes that US President Trump released his 2018 Budget last week, and the biggest surprise is the virtual goose egg on the bottom line. Key Quotes “The deficit is projected to fall below $500 billion (or 2.2% of GDP) in 2020 before morphing into a small surplus in 2027. Accordingly, the federal debt drops to 60% of GDP in 2027 from 77% this year.” “Trump’s plan to balance the books contrasts sharply with the Congressional Budget Office’s base-line forecast. Under current law and much different economic assumptions, the CBO projects the deficit will climb from $559 billion, or 2.9% of GDP, in 2017 to $1.4 trillion, or 5.0%, in 2027 (and then to 10% by 2047), lifting the federal debt to 89% (and 150%). Total spending is forecast to rise from 20.7% of GDP to 23.4% in 2027, largely in response to escalating Social Security and Medicare costs (which will consume nearly one of every two dollars spent by the government in 2027 due to an aging population).” “Total revenue is projected to increase more slowly from 17.8% of GDP to 18.4% amid modest economic growth. Real GDP is assumed to expand just 1.9% on average through 2027 (only slightly better than potential of 1.8%) owing to a slow-growing labour force (0.6%) and moderate productivity gains (1.5%). In fact, the CBO’s estimate of the deficit this year might be too low based on recent figures.” “Trump’s budget assumes real GDP increases 2.3% this year and 3.0% from 2021 to 2027. Growth averages 2.8% in the next decade, compared with the CBO’s 1.9% and the Blue Chip consensus’ 2.1%. By 2027, the economy is 11% larger than the CBO assumes.” “Despite faster growth, Trump’s budget sees the jobless rate rising to 4.8% from 2021 to 2027. This is only slightly below the CBO’s view (4.9%) and close to the Fed’s estimate of the natural rate of unemployment (4.7%). As a result, inflation holds steady, keeping interest rates relatively low.” “Though not zero, the odds of achieving 3% growth for six years are pretty low. True, real GDP did expand 3.0% on average in the past 60 years, and ran even well above this pace for consecutive years in the 1960s, 1980s and 1990s. However, the labour market is now operating at full employment. This means it will take more than demand-stoking tax cuts to boost growth. Supply will also need to increase to accommodate more demand.” “Bottom Line: The President’s budget stands virtually no chance of becoming law.2 Democrats and moderate Republicans (many eying midterm elections) will push back at the hefty cuts to social programs. Fiscal hawks will question the over-reliance on faster economic growth to balance the books (no sure thing), as opposed to reining in escalating entitlement program costs (a sure thing given demographics). While the President’s recommendations will help shape budgets developed in the House and Senate, most of his proposals will be rejected, reducing the odds of a budget passing into law. In this event, Congress would need to pass continuing resolutions to keep parts of the government running next year. And, the fate of Trump’s tax cuts would be left up in the air.” WTI off lows, still below $50.00 http://www.bull-trend.com/ Currencies http://www.bull-trend.com/ Mon, 29 May 2017 12:40:44 -0400 Crude oil prices are eroding part of last Friday’s moderate advance, taking the barrel of West Texas Intermediate slightly off daily lows in the $49.70/75 band. WTI gains capped around $50.00 Prices for WTI are trading in the upper end of the recent range at the beginning of the week, while traders seem to have already digested the recent sharp sell off in the wake of the OPEC decision to extend the deal to cut the oil output for an extra 9 months. The barrel of WTI briefly tested the vicinity of the $48.00 mark on Friday, although they somewhat managed to regain traction and reach the boundaries of the key $50.00 handle, losing some vigour afterwards. Collaborating with the lack of a clear direction in prices, driller Baker Hughes reported on Friday another increase in US oil rig count, this time by 2 to 722 in the week ended on May 19. Later in the week, the API will publish its report on US crude stockpiles on Wednesday ahead of the EIA’s report on inventories on Thursday. WTI levels to consider At the moment the barrel of WTI is losing 0.06% at $49.77 and a breach of $49.44 (55-day sma) would aim for $48.54 (20-day sma) and finally $48.18 (low May 26). On the upside, the next hurdle is located at $50.94 (100-day sma) followed by $52.00 (high May 25) and then $52.65 (high Apr.18). GBP/USD sits at session tops, around mid-1.2800s amid low volatility and thin liquidity http://www.bull-trend.com/ Currencies http://www.bull-trend.com/ Mon, 29 May 2017 12:21:54 -0400 The GBP/USD pair staged a goodish recovery bounce and eroded part of Friday's sharp losses to one-month lows, below the 1.2800 handle.  Currently trading around 1.2845 region, the pair gradually moved higher through European trading session despite of the weekend polls revealed narrowing lead for May's Conservative party lead. With the UK general election less than two-weeks away, it would be interesting to see if the pair is able to build on the recovery move or runs through some fresh offers at higher levels amid renewed concerns over a possible 'hard Brexit' scenario. The ongoing recovery move lacked any fundamental drivers and could be solely attributed to short-covering on the back of a modest US Dollar retracement amid low volatility and thin liquidity conditions in wake of a bank holiday in the UK and the US. With a high degree of market conviction that the Fed would eventually move towards raising interest rates in June, this week's NFP data would be looked upon for reinforcement and would eventually help determine the greenback's near-term trajectory. Fed is tightening in a gradual way – BMO CM Also in focus this week would be a slew of important macro data due for release at the beginning of a new month and incoming UK polls, which could possibly contribute towards making this an eventful week for the major.  US NFP and upcoming polls of UK in focus this week - Rabobank Technical levels to watch Any further up-move beyond mid-1.2800s might confront resistance near 1.2880 horizontal level, above which the momentum could get extended towards 1.2900-1.2910 strong support break-point, now turned important resistance. On the flip side, weakness back below 1.2820 level, leading to a subsequent break below the 1.2800 handle, would turn the pair vulnerable to extend the slide even below 1.2775-70 support (Friday's) and head towards testing sub-1.2700 support area. BoC: Turning optimistic - BMO CM http://www.bull-trend.com/ Currencies http://www.bull-trend.com/ Mon, 29 May 2017 12:13:33 -0400 Benjamin Reitzes, Canadian Rates & Macro Strategist at BMO Capital Markets, explains that the Bank of Canada appears to be turning more optimistic on the Canadian economy as last week’s statement spent many more words highlighting the positives, rather than emphasizing the negatives. Key Quotes “We saw two changes to the statement as particularly important. First, the Bank dropped the word “material” when referring to “excess capacity”. That’s clearly less dovish and shows they believe the output gap is shrinking. (Which should be clear given Q1 GDP growth… but this solidifies that point). Second, while the BoC noted that core inflation measures have slowed, they didn’t seem overly fussed and suggested that food disinflation—which is not relative to capacity pressures—is having a meaningful impact.” “Despite the more positive tone, there were still some notes of caution. Indeed, “the uncertainties outlined in the April MPR continue to cloud the global and Canadian outlooks.” Unfortunately, many of those uncertainties aren’t likely to clear up in the near term. The Canada-U.S. trade relationship could remain in flux until year-end. NAFTA renegotiation doesn’t start until August at the earliest, and those talks will probably take a few months at the very least. U.S. fiscal policy is a big question mark. Europe continues to face political uncertainty. Oil prices are struggling to hold on to $50. And, the full impact of the new housing measures won’t be known for months. There remain plenty of reasons to be cautious, but that’s exactly why the BoC is still a long way from raising rates.” “Perhaps the biggest thing to watch through the summer months is whether the slowdown in Toronto/Ontario housing has a knock-on effect on other sectors, notably consumption. Note that Ontario accounts for about a 40% share of the national economy (similar for housing), so any softness will clearly impact headline growth. This could be a meaningful downside risk to the outlook and one of the few made-in-Canada risks. The eruption of a broad construction strike in Quebec is another factor—a prior such strike in June 2013 saw a 0.4% drop in GDP that month on a 2.1% plunge in construction.” “Key Takeaway: The BoC took a baby step toward an eventual rate hike, though we’re still a long way from a move. Our other key takeaway is that, barring some catastrophe (the usual caveat), a rate cut is all but off the table.” NZD/USD surges to fresh two-month highs, fast approaching 0.71 handle http://www.bull-trend.com/ Currencies http://www.bull-trend.com/ Mon, 29 May 2017 11:44:19 -0400 The NZD/USD pair continued gaining traction through mid-European session and built on to its break-out momentum above 100-day SMA important hurdle. The New-Zealand Dollar remained underpinned by last week's government budget, expecting to post a larger surplus in 2017 and planning to invest in infrastructure to fuel the economic growth.     •  NZ Budget: Fiscal outperformance allows a looser stance – HSBC Adding to this, political turmoil in the US, raising doubts over the US President Donald Trump's ability to push through pro-growth economic policies and leading to a sharp slide in the US treasury bond yields continued driving flows towards higher-yielding currencies - like the Kiwi, and collaborated to the pair's up-surge to its highest level since March 21. Currently placed at fresh two-month tops, the pair's sharp up-tick of around 20-pips in the past hour or so could be attributed to some short-covering in wake of a sustained strength above 0.7070 horizontal resistance. It, however, remains to be seen if the up-move is backed by genuine buying interest or turns out to be a short-run amid holiday thinned trading conditions on the back of a bank holiday in the US. Technical levels to watch The ongoing momentum seems strong enough to lift the pair beyond the 0.7100 handle towards testing its next major hurdle near 0.7115 region (200-day SMA). On the flip side, any retracement now seems to find immediate support at 100-day SMA near 0.7055-50 region, which if broken might trigger a profit taking slide back towards 0.7025-20 horizontal support en-route the key 0.70 psychological mark. SEK: Soft Riksbank dominates strong macro - Danske Bank http://www.bull-trend.com/ Currencies http://www.bull-trend.com/ Mon, 29 May 2017 11:42:43 -0400 With a softer than expected Riksbank, the research team at Danske Bank believes that the potential for a large SEK strengthening is limited but, fundamentals will continue to be SEK supportive and they therefore look for a more gradual strengthening. Key Quotes “We see EUR/SEK in 9.60 in 1M, 9.50 in 3M, 9.50 in 6M and 9.30 in 12M.” “The growth picture is still an argument for a medium-term rebound in the SEK, with above-trend, above-peer growth and a very strong labour market. The problem, for the Riksbank and, thus, for the SEK is that strong growth does not fuel enough inflation.” “The Riksbank’s persistence, provided it is credible, continues to be a challenge for anyone believing the SEK is a strong buy from a macro or fundamental view. Our inflation forecasts suggest that speculation on early removal of the current stimulus is premature. While we do not expect further rate cuts or more QE, we think the Riksbank will be forced to postpone its first hike (now Q3 18) further (into 2019).” “The Riksbank surprised with a QE taper extension and the minutes confirmed a soft tone. We cannot rule out further stimulus if inflation disappoints but we do not expect it. It seems to us that the Riksbank is getting better traction in the currency market than the money market, while the SEK is arguably weaker but the money-market curve is still steeper than the Riksbank path. As long as the Riksbank and ECB stay soft, it is likely to hinder any meaningful rebound in the SEK.” USD/JPY looks for direction around 111.30 http://www.bull-trend.com/ Currencies http://www.bull-trend.com/ Mon, 29 May 2017 11:37:50 -0400 The greenback is trading almost unchanged vs. its Japanese counterpart at the beginning of the week, taking USD/JPY to a sideline theme around the 111.30 region. USD/JPY supported around 110.80 The pair is practically hovering over last Friday’s close, struggling for direction amidst extremely light trading conditions in response to the holidays in both the US and UK. In the meantime, spot has managed to revert the drop from last week’s lows in the vicinity of the 110.80 region, although gains appear so far limited just below 112.00 the figure. On the positioning front, JPY speculative net shorts have receded to 2-week lows in the week to May 23 according to the latest CFTC report. Data wise ahead in the week, Japanese retail sales and April’s unemployment rate are due tomorrow, while PCE figures and personal income/spending will be the salient events in the US calendar. USD/JPY levels to consider As of writing the pair is losing 0.02% at 111.33 with the immediate support at 110.85 (low May 26) seconded by 110.51 (61.8% Fibo of 108.11-114.39) seconded by 110.21 (low May 18) and then 110.12 (200-day sma). On the flip side, a breakout of 111.99 (38.2% Fibo of 108.11-114.39) would open the door to 112.12 (high May 24) and finally 112.41 (20-day sma).   G10: Important week ahead - BAML http://www.bull-trend.com/ Currencies http://www.bull-trend.com/ Mon, 29 May 2017 11:35:47 -0400 Analysts at Ban of America Merrill Lynch explains that as FX investors continue to warm towards the EUR, the mood towards USD remains ambivalent. Key Quotes “FOMC Minutes triggered a dovish response, though overall markets largely continued in their previous trends. USD is weaker despite unchanged pricing for the June Fed meeting (or indeed for the rest of the year) and EM continued to perform. Focus now turns squarely to the upcoming US data, particularly core PCE, ISM and next Friday’s payrolls report. With a June hike 80% priced, any Fed commentary will be carefully parsed for clues that the Fed is comfortable with this pricing. With the blackout period looming, the Fed only has next week to push back against market expectations if they so choose.” “The higher EUR theme was also broadly in place this week as data remained robust and following commentary from Chancellor Merkel that the currency is too weak. With the next ECB meeting fast approaching, and expectations that we will see a change in language signaling a hawkish shift already at the June meeting, next week’s Eurozone inflation data will draw increased attention. While positioning does not look stretched on a longer-term perspective, it is worth noting how sharp the recent position adjustment has been in EUR, suggesting some risks of tactical pullbacks.” “Elsewhere, we remain bearish on JPY vs both EUR and USD, though the near-term outlook for USD/JPY is more uncertain. Both fundamentals and positioning also argue for long NZD/JPY. We are cautious on GBP, and feel the market consensus has turned too positive on Brexit. We are tactically short GBP, initiating a long EUR/GBP trade.” JPY: Relative rates to be a factor driving weakness - Danske Bank http://www.bull-trend.com/ Currencies http://www.bull-trend.com/ Mon, 29 May 2017 11:31:41 -0400 Analysts at Danske Bank expect the Bank of Japan to keep policy unchanged for the next 12M and sees relative rates as a factor driving JPY weakness. Key Quotes “We target EUR/JPY at 122 in 1M, 124 in 3M, 129 in 6M and 135 in 12M.” “Outlook for EUR/JPY We expect the Japanese economy to continue to grow above trend in coming years. While exports and production have been on an increasing trend, mainly on the back of the cyclical improvement in the global manufacturing sector, domestic demand remains supported by the government’s fiscal stimulus package. We estimate annual Japanese GDP growth of 1.2% in 2017 and 0.9% in 2018 (FY 2016 1.3%, FY 2017 1.1%). Since the introduction of Yield-Curve Control (YCC) in 2016, under which the Bank of Japan (BoJ) now targets both the short-term policy interest rate (at -0.1%) and the 10Y Japanese government bond (JGB) yield (at 0%), the BoJ has de facto tapered its JGB purchases and is currently buying an amount equivalent to an annual pace of JPY60trn. We expect the BoJ to keep its policy unchanged throughout our 12M forecast horizon and, while the BoJ could taper further, we think the yield spread relative to the US – and not the amount of JGB purchases – will remain a key driver for JPY crosses in general. On 10 May, BoJ Governor Haruhiko Kuroda, in a speech to Parliament, said that the current pace of JGB purchases is around JPY60trn per year and thus lower than the BoJ’s previous annual purchase target of JPY80trn. As such, the scale down of JGB purchases has been evident in the BoJ’s publicly available data since the BoJ changed its monetary policy framework in September 2016 when it introduced yield curve control. For the FX market, we highlight that the yield spread – and not the amount of JGB purchases – is the main driver for JPY crosses as higher foreign yields support Japanese demands for foreign bonds and encourage Japanese investors to reduce the hedge ratio on foreign assets as hedging costs increase.” Gold: Geopolitical tensions provide support - NAB http://www.bull-trend.com/ Currencies http://www.bull-trend.com/ Mon, 29 May 2017 11:27:50 -0400 The research team at NAB explains that gold has been one of the better performing commodities during 2017, with the year to date (May 18) spot return of 8.7%.  Key Quotes “Following the election of the Trump administration, and expectations that it would be able to achieve its infrastructure agenda, the gold price fell to a recent low of USD1125/oz around December 2016. This period also witnessed a rise in equity markets and a stronger US Dollar.” “However, gold regained investor confidence during 2017, as doubts about the Trump’s administration’s ability to see through their policy agenda and political difficulties have emerged. Moreover, there has also been a number of geopolitical events such as European elections – the results in France and Netherlands have somewhat assuaged financial markets – and the flashpoint in the Korean peninsula.” “These trends have also been mirrored by the net long open positions in gold derivative markets. After having reached a recent low at the end of 2016, market participants have increased their net long position in gold derivatives in response to geopolitical uncertainties, although this has abated somewhat of late, due to higher gold prices.” “The spot price of gold jumped nearly 2% on the 17th of May, the most significant daily increase since the Brexit vote on May 2016. Political developments will be closely watched by the market, and could be a potential driver of additional uplift in gold prices going forward.” “Comments by St. Louis Fed President, James Bullard, that inflation remains subdued, and the Fed’s interest rate expectations might be too aggressive, have also been supportive of gold.” “We expect gold to be largely range-bound around the USD1250/oz  level. More specifically, we are expecting the gold price around USD1254/oz, by the end of 2017, rising to USD1300 by the end of 2018.” UK snap election not a catalyst for EUR/GBP - Danske Bank http://www.bull-trend.com/ Currencies http://www.bull-trend.com/ Mon, 29 May 2017 11:24:35 -0400 The analysis team at Danske Bank explains that with the Conservatives in line to strengthen their position at the UK election in June, they expect the GBP to trade somewhat stronger. Key Quotes “We still see it range bound and Brexit risks are nowhere near gone. We target EUR/GBP at 0.84 in 1M, 0.84 in 3M, 0.83 in 6M and 0.83 in 12M.” “The UK economy slowed substantially with GDP growth down from 0.7% q/q in Q4 to 0.3% q/q in Q1. The near-term growth outlook remains subdued as real wage growth has turned negative, implying less scope for private consumption growth, which among others is evident in the recent plunge in retail sales. CPI inflation rose to 2.7% y/y in April and is expected to move a bit higher in the coming months, peaking around 3% later this year.” “The Bank of England (BoE) made no policy changes at its May meeting but maintained its hawkish twists, as Kristin Forbes (a known hawk) still voted for a hike and as the meeting summary stated that BoE thinks the current market pricing of BoE hikes is a bit too soft (market is currently pricing in an accumulated 20bp rate hike by the end of 2018). We still expect the BoE to remain on hold for the next 12 months, as we think it is unlikely the BoE will tighten monetary policy at a time of elevated political uncertainty.” “We do not expect the UK election to be a significant driver for EUR/GBP and we expect the cross to mostly trade within the 0.84-0.85 range ahead of the UK election. In our main scenario that PM Theresa May consolidates power, the trading range for EUR/GBP should be in for a modest shift lower amid a reduction in tail risks of a ‘no deal Brexit’. The domestic outlook in the UK does not provide much relief for the GBP in the coming year: growth is set to slow and we expect the Bank of England to remain on hold for a long time irrespective of the outcome of the election.” Gold consolidating Friday's strong up-surge to 4-week tops http://www.bull-trend.com/ Currencies http://www.bull-trend.com/ Mon, 29 May 2017 11:15:52 -0400 Gold was seen consolidating Friday's strong gains to 4-week tops and oscillated in a narrow trading range just above $1265 level amid lighter trading volumes.  Political tensions surrounding the Korean peninsula, following the latest ballistic missile test by North Korea supported the precious metal's safe-haven demand at the start of a new trading week. The initial up-move, however, lacked conviction as market players seemed convinced that the Fed would eventually move towards raising interest rates at its June meeting, which seems to have kept a lid on any further up-move for the non-yielding metal, at least for the time being.     •  Fed rate hike coming soon – Goldman Sachs However, a weaker US Dollar was seen lending some support to dollar-denominated commodities - like gold, and a combination of diverging factors has led to a subdued/range-bound price action amid holiday thinned liquidity conditions. The UK and the US markets would remain closed on Monday in observance of Memorial Day and Spring Bank Holiday, respectively. Technical levels to watch Bulls would be eyeing for a momentum beyond $1270 level, above which the metal seems all set to head towards $1275 horizontal resistance en-route its next major hurdle near $1279-80 region. On the downside, $1264-63 region now becomes immediate support to defend, which is closely followed by a horizontal support near $1260 level. Any further weakness below $1260 level now seems to find fresh buying interest near $$1255-54 support area. Copper: Supply disruptions an ongoing theme while demand gradually slows - NAB http://www.bull-trend.com/ Currencies http://www.bull-trend.com/ Mon, 29 May 2017 11:02:29 -0400 The analysis team at NAB notes that copper prices have declined over the quarter, sitting at around $5700/t, down from the peak of around $6100/t in February as the bullish sentiment following the US elections last year has abated somewhat, while the few major supply disruptions that provided support to prices in early 2017 have also been resolved.  Key Quotes “A six-week strike at Escondida, the world’s biggest copper mine, ended in late March. Output was down 60% in the March quarter, with operations returning to full capacity in April. Strikes at Southern Copper’s Peruvian mines and refinery were also resolved in two weeks, with limited supply disruptions as the company used temporary workers to maintain production. Freeport  resumed exports in late April from its Grasberg mine in Indonesia, after being suspended by the government since mid January. However, union workers started a strike on 1st May over job security, which could last until the end of June. Output may have been reduced by half, as estimated by a union official.” “Supply disruptions in the copper markets due to worker strikes or weather conditions will remain an ongoing theme, as workers dispute contracts previously settled during a period of low prices and low profitability and now demand improved working conditions and better job security. This trend could see concentrates supply decline and provide support to prices, but has been largely expected and priced in.” “On the demand side, indicators continue to point to an easing in Chinese growth. Policies to control the housing market and the transition towards the services industries will see demand continue to gradually slow. Potential infrastructure spending in the US could improve demand, however little details have been revealed to date.” “Overall, we forecast a largely balanced market  for 2017 and a small surplus in 2018, with  prices averaging  $5720/t.” Germany's Seibert: Merkel considers it necessary to address G7 differences http://www.bull-trend.com/ Currencies http://www.bull-trend.com/ Mon, 29 May 2017 11:02:17 -0400 German government spokesman Seibert out with a statement, following weekend’s G7 meetings. Key Headlines: Merkel considers it necessary to address G7 differences Merkel is a deeply convinced Atlanticist Merkel has said before that Europe has its own fate in its hands and must strengthen capabilities Merkel believes it is important to stress differences precisely because Atlantic relationship so important EUR/USD to target 1.07 in 1M - Danske Bank http://www.bull-trend.com/ Currencies http://www.bull-trend.com/ Mon, 29 May 2017 10:59:01 -0400 Analysts at Danske Bank explain that with political risks to a large extent over for now, with Macron’s win in the French presidential election, focus now turns to fundamentals and they target EUR/USD at 1.07 in 1M, 1.09 in 3M, 1.11 in 6M and 1.16 in 12M. Key Quotes “A marked divide has materialised between the US and the Eurozone lately with data surprises in the latter increasingly positive, whereas the opposite is the case for the US. Confidence in president Trump’s fiscal agenda is fading and stimulus will clearly be smaller and deferred compared with expectations. In the euro area, the output gap has yet to close and a sustained region-wide pick-up in wage growth is still far off, in our view.” “While expectations about Fed tightening remain below FOMC dots, pricing has been upped lately. We maintain that the Fed will likely use the June meeting for communication regarding ‘quantitative tightening’ (QT) and not hike until July; we expect one more hike in December and three in 2018. Although there is room for the market to price the Fed more aggressively, shifts in policy stances are key. Thus we see the ECB as instrumental to any direction in monetary policy: a first 10bp hike from the ECB is currently priced mid 2018 but a signal that the Governing Council is changing its communication on rates should send EUR/USD higher.” “The level shift after the first round of the French election took EUR/USD into higher ranges and was testament to political risks having been key in deferring the cross from moving higher. Near term, while the ECB will likely grow a tad more hawkish in June in light of the recent upside surprises to both activity and inflation, the Fed is simultaneously set to announce a QT scheme which is ‘unchartered territory’ for US markets. This could support the USD somewhat near term but we stress that the significant move to watch out for on a 12M horizon will likely be fuelled by an ECB shift away from further easing.” Oil: Brent likely to recover to mid-high US$50s by the end of 2017 - NAB http://www.bull-trend.com/ Currencies http://www.bull-trend.com/ Mon, 29 May 2017 10:55:22 -0400 The research team at NAB sees Brent recovering to mid-high US$50s by the end of 2017, climbing to mid US$60s by the end of the decade. Key Quotes “Late last year, OPEC and Russia agreed to limit production to 1.8mb/day. The OPEC-Russia deal initially saw markets jump significantly, from midhigh US$40s to mid US$50s/bbl (Brent). However by March it had become clear that improved prices were helping US shale producers restart production and steal market share from OPEC, sending prices tumbling back into the low US$50s range for Brent.” “US production looks set to perform, having bottomed out in October last year. Latest EIA data show weekly US crude production exceeding 9.3 million bbl/day, the highest since August 2015. With rig counts heading upwards, it is likely that US production will continue to climb if prices hold steady.” “OPEC members decided last week to continue the production cuts another nine months. Despite the decision, however, much of the upside from the OPEC extension was already priced in, while a fall in prices following the decision possibly reflects some disappointment in the market that members failed to come to a last minute agreement to deepen the production cuts even further. Combined with the ability of US producers to restart production, major upside for oil prices will probably remain elusive.” EUR/GBP cross to mostly trade within the 0.84-0.85 range ahead of the UK election - Danske Bank http://www.bull-trend.com/ Currencies http://www.bull-trend.com/ Mon, 29 May 2017 10:47:23 -0400 Analysts at Danske Bank expect the EUR/GBP cross to mostly trade within the 0.84-0.85 range ahead of the election targeting 0.84 in 1M. Key Quotes “Looking at the past UK elections, there is no clear conclusion about how general elections influence the exchange rate: in 2010 EUR/GBP declined 1.7% in the two weeks prior to Election Day and in 2015 EUR/GBP rose 3.3% in the last week prior to the election. We do not expect the UK election to be a significant driver for EUR/GBP this time as a large Brexit risk premium is already priced in the GBP and the GBP is already undervalued according to our Medium-term Valuation Model (MEVA).” “The medium-term outlook for EUR/GBP depends on the outcome of the election. In our main scenario that PM Theresa May consolidates power, the trading range for EUR/GBP should be in for a modest shift lower amid a reduction in tail risks of a ‘no deal Brexit’. We target EUR/GBP at 0.84 in 3M and 0.83 in 6-12M but stress that we still expect the cross to remain volatile with the range of 0.82-0.8650 and remain very sensitive to the development in the Brexit negotiations.” EUR/USD side-lined below 1.1200 ahead of ECB's Draghi http://www.bull-trend.com/ Currencies http://www.bull-trend.com/ Mon, 29 May 2017 10:44:18 -0400 The EUR/USD pair once again found support near 1.1160 levels and made an attempt to regain 1.12 handle in the European, but in vain, as the bears continue to guard the 1.12 barrier, leaving the rate side-lined around 1.1180 levels. EUR/USD: 1.1200 or 1.1160 on ECB Draghi’s speech? The spot is struggling hard to take on the recovery above 1.12 handle, despite a broadly subdued US dollar and moderate risk-aversion, as the EUR traders await the speech by ECB President Draghi for fresh direction. Meanwhile, the USD index trades modestly flat around 97.30 levels, after having faced rejection just shy of 97.50. Meanwhile, irrespective of Draghi’s comments today, the major is expected to remain underpinned going forward on the back of bullish technicals. The daily chart confirmed a ‘Golden Cross’ i.e. a bullish crossover between 50-DMA and 200-DMA on May 23rd. Moreover, holiday-thinned markets may provide extra legs to the pullback in EURUSD from near 1.1160 region, while markets are widely expecting the ECB Chief to turn out dovish today. ECB President Draghi us due to testify about the economy and monetary developments before the Economic and Monetary Affairs Committee, in Brussels. During his testimony, Draghi may reiterate that Eurozone growth and labor market are showing solid improvement, but remain vary on the inflation outlook. ECB: Euro zone corporate lending growth hits post-crisis high - RTRS ECB’s Nowotny: Shouldn't speculate on outcome of June ECB meeting ECB’s Villeroy: Steepening of yield curve good for banks, doesn't expect "brutal" rise in rates EUR/USD Technical Levels Valeria Bednarik, Chief Analyst at Bakinv noted: “1.1160 is the immediate support ahead of 1.1120, with a stronger one at 1.1080. Seems unlikely the pair can break below this last. Above 1.1200, the risk will turn towards the upside, with scope then to advance up to the 1.1240/60 region.”